I give a lot of credit to real estate developers.
They take on big risks and reap large rewards when enough things go right.
In that case, it would be no surprise to see the finishes chosen be more value-oriented, though you will see this type of thinking across most, if not all, new buildings.
This was conceived as a way to circle the square.
The church sees new buildings and funds, and the developer builds in an area which is hard to acquire land sites (in this case, a parking lot!).
developer, who decided to
convert the building to condominium and sell the units.
The question is how condo buyers greet the final product.
100 Barrow Street
Building only 33 units in this project gave them the ability to do larger apartments.
In this case, layouts in the building feature the same themes – open kitchens, sumptuous master suites, smaller second and third bedrooms, nice ceiling heights,
finishes that speak to the industrial tinge that this part of the West Village once embodied.
First, as a land lease, the estimated charges of a large two-bedroom is nearly $5000 per month.
Without a 10-year tax abatement in place, these charges jump to over $8000 per month.
In a rising market, perhaps fewer buyers would focus on these charges – but the asking prices do not reflect these higher charges.
What does this mean?
The building’s charges in the case of 100 Barrow are a ground lease rent – and depending on the structure, may not be tax deductible. So, the high charges end up not carrying the same tax savings as in a condominium.
This may be a big problem for buyers.
Secondly, while the ground rent is fixed for 99 years, allowing a buyer to know what his or her charges will be into the future, the lease usually factors in resets every 15-20 years based on market conditions and taxes at that time.
I suspect that these charges always will outpace the market.
This does not factor in the potential for extra building charges that could add up, requiring the building to increase the non-ground rent portion of the charges.
All in all, a situation a bit more fraught than normal.
And I suspect that someone spending $4-12mm on an apartment may want to hear more along these lines.
416 West 52nd
For 52nd and 10th Avenue, this initially didn’t seem like a reach, given the location is looking better all the time.
9th Avenue has become a restaurant row, and other projects in the high 40’s and low 50’s have delivered a lot of value.
Recall, however, that this building was renovated as a rental building, and it shows.
Second, the finishes are, well, less than you’d expect when paying at this level.
Third, storage and closet space are a bit lacking at every size apartment.
In the larger units, the pricing hasn’t exactly moved down on a price per square foot basis, but the monthly charges jump about 10% more.
These duplexes have a lot of square footage, but some are in basement space.
In the end, I would suspect that the pricing needs to be adjusted to accommodate for higher monthly charges and lower quality finishes.
What’s interesting is the difference between 416 West 52nd and 432 West 52nd, which were both hospital buildings, and were conceived to be one project.
In the end, the rental portion (416) just didn’t turn out as well as 432.
Quite a shame.
Given that 432 is nearly sold out, it would appear that the market puts a premium on higher-end finishes at the moment.
In all, new development is in the middle of a transitional time.
Some are far more negativethan I am.
I will keep close tabs on the velocity of the market and will have more for you to consider in the coming months.